WilliamL. Watts

SAN FRANCISCO (MarketWatch) — Oil futures topped $102 a barrel on Tuesday as tensions flared up in Ukraine and the U.S. dollar traded sharply lower, lifting prices to their highest settlement in a month.

Prices also climbed in the wake of a monthly oil report from the U.S. government, which revealed higher U.S. oil price expectations for this year and lower production estimates for this year and next. Expectations for a climb in weekly U.S. crude inventories and the potential for more supplies from Libya had put a cap on price gains earlier on in the trading session.

Crude oil for May delivery
US:CLK4
rallied $2.12, or 2.1%, to settle at $102.56 a barrel on the New York Mercantile Exchange. Tracking the most-active contracts, prices closed at their highest level since March 7, FactSet data show.

On the ICE Futures exchange, May Brent crude
UK:LCOK4
the European benchmark, also rose $1.85, or 1.8%, to $107.67 a barrel.

Ukrainian police on Tuesday took back control of a government building occupied by pro-Russian separatists in one eastern Ukraine city, while Russian police warned that the use of force to dislodge demonstrators could push the country into civil war.

Oil prices had fallen 0.7% on Monday, with Brent leading the way on reports Libya was close to reopening two oil ports following an agreement with rebels to allow four oil ports to reopen.

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“The crude complex is finding a number of pockets of support ... as Russia calls on Ukraine to halt military preparations or risk a civil war,” said Matt Smith, a commodity analyst at Schneider Electric. “Meanwhile, after relinquishing control of two ports yesterday, Libyan rebels are expected to hand over control of two other ports to the government in the coming weeks.”

A sharp decline in the U.S. dollar also contributed support to dollar-denominated oil prices on Tuesday. The euro
EURUSD, +0.0000%
rose against the dollar, rebounding after comments last week from European Central Bank President Mario Draghi suggesting that the ECB was considering quantitative easing as an option to fight falling inflation pressured the euro.

Data watch

The focus in the oil markets is also turning to petroleum supply data due later Tuesday from the American Petroleum Institute and from the Energy Information Administration Wednesday morning, covering the week ended April 4.

Analysts surveyed by Platts expect to see a climb of 2.5 million barrels in crude supplies, along with a decline of 1.3 million barrels in gasoline stockpiles and a fall of 800,000 barrels in distillates, which include heating oil.

On Nymex, May gasoline
US:RBK4
climbed over 5 cents, or 1.9%, to close at $2.98 a gallon, while May heating oil
US:HOK4
rose more than 4 cents, or 1.5%, to $2.93 a gallon following declines for both in the previous session.

There could be “minimal impact” from Wednesday’s petroleum-supply numbers, though Ukraine is stealing the headlines and driving prices for now, said Casey Clark, senior trading advisor at Altavest.

The EIA also cut its U.S. crude production estimate for this year to 8.37 million barrels per day, from 8.39 million barrels per day. It also lowered its 2015 output estimate to 9.13 million barrels per day from 9.16 million barrels per day.

It also lowered its 2014 Brent crude forecast to $104.88 from $104.92 and 2015 natural-gas price forecast to $4.11 per million British thermal units from $4.14.

On Tuesday, May natural-gas futures
US:NGK14
on Nymex tacked on nearly 6 cents, or 1.3%, to settle at $4.53 per million British thermal units, extending its gain from a day earlier to settle at their highest in more than a week.

A report from the EIA on Tuesday said that natural gas-fired power plants accounted for just over 50% of new utility-scale U.S. generating capacity added in 2013, and that 60% of the natural-gas capacity added last year was located in California.

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